Oil dented by rising tide of supply

06 August, 2018, 11:33 | Author: Sara Gill

Saudi Arabia, Russia, Kuwait and the United Arab Emirates have increased production, as agreed at a meeting in June, to help to compensate for an anticipated shortfall in Iranian crude supplies once US sanctions come into force later this year.

The EIA now estimates that the June production would be 10.900 million bpd, but the revision to the May figure suggests that the output for June could be lower than the expected 10.9 million bpd, according to Bloomberg.

Crude prices remained supported by the prospect of an Iranian supply squeeze following the imposition of United States oil sanctions, with yesterday's rally stymied by short-term bearish supply factors that continue to weigh on prices. "Brent oil may fall to $67 per barrel", said Reuters technical commodities analyst Wang Tao. "We may be seeing a similar move now". US crude futures slumped last month by the most in two years, and traded just below $68 a barrel yesterday on the New York Mercantile Exchange.

Total products supplied over the last four-week period averaged 20.87 million barrels per day, up by 0.6 percent from the same period previous year.

Crude oil prices moved up by 0.33 per cent to Rs 4,580 per barrel in futures market today as participants raised bets, tracking a firm trend in the global markets.

The global benchmark traded at $5.86 premium to WTI in the same month after the spread widened to as much as $11.43 in June. The contract lost 1.9 percent on Wednesday.

Low U.S. stockpiles were still providing a floor for prices, with overall U.S. crude inventories below the five-year average of around 420 million barrels.

The country's top two refiners SK Energy and GS Caltex bought 2 million barrels of USA crude each for October arrival, while its smallest refiner Hyundai Oilbank has also purchased 2 million barrels of medium-sour Mars crude for the first time, the sources said.

"A wide price spread between the USA and global benchmarks a while ago made American crude relatively cheap and attracted buyers, helping decrease inventories", Mizuho's Tsugata said. "They will bring in more US crude in the second half of the year because a wider WTI-Dubai spread is making USA crude purchases economically viable", said Kim Jae-kyong, a research fellow at Korea Energy Economic Institute.

At a June 22 meeting, OPEC agreed to boost output by returning to 100 percent compliance with oil output cuts that took effect in January 2017, after months of underproduction by countries including Venezuela and Angola.

The survey shows Saudi Arabia's output was below the 10.8 million barrels a day threshold that the kingdom was said to be indicating it would pump in July, suggesting demand for its oil isn't as strong as initially expected.

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